County, city leaders discuss influence of Chapter 11 filings on taxes, infrastructure development

THE LAKEPOINT EFFECT? Officials weigh in on economic impact of facility's bankruptcy

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Shortly after the $1 billion complex opened in Emerson in 2014, it didn't take county and municipal officials long to begin celebrating "the LakePoint effect."

According to some reports, the complex is adding almost $100 million in economic impacts to the region each year, with an especially palpable impact on local businesses. Over the last five years, Bartow County Administrator Peter Olson said food, bar and hotel revenue in the county is up 80 percent, while Cartersville-Bartow County Convention and Visitors Bureau Executive Director Ellen Archer said local hotel revenue increased 64 percent between 2013 and 2016 alone.

With eight LakePoint Sporting Community affiliates filing for Chapter 11 bankruptcy June 11, however, questions have arisen over how the financial well-being of LakePoint may — directly or indirectly — impact the financial well-being of Bartow County in the future, particularly in terms of infrastructure development and tax revenue.

Bartow County Commissioner Steve Taylor said the bankruptcy announcement earlier this week wasn't unexpected. 

"We're not really surprised at all and we're not worried about them," he said. "Our agreement now is with Rimrock Capital and not with LakePoint Land, the original investors. I see LakePoint moving forward as they have been, really. ... For the last year and a half, this has been going on with the original investors. They just kind of drug their feet on filing Chapter 11."

Nor did Melinda Lemmon, executive director of the Cartersville-Bartow County Department of Economic Development, consider the announcement that much of a surprise.

"Since Rimrock’s increased involvement, it is logical that their own financial decisions will be implemented," she said. "I think many are trying to understand the impacts of actions like this filing, but LakePoint has been proactive in reaching out to explain [and] reassure many like myself."

Ultimately, Emerson Mayor Al Pallone said he believes the bankruptcy proceedings will prove to be a positive for the local economy.

"We're going to have a more stable organization and the fact that it's all going to be in equity means they're going to be able to do more," he said. "Really, the biggest economic impact for Emerson is the hotels — getting more hotels is pretty critical." 

According to filings in the U.S. Bankruptcy Court for the Northern District of Georgia in Rome, Rimrock Capital Management LLC — the California-based hedge fund that acquired LakePoint Land LLC's assets in 2016 — has until Oct. 9 to have a formal Chapter 11 recapitalization plan in place.

"They way they've worked it out, from what I've been told, is the original investors still have an opportunity to get their money back," Taylor said. "Chapter 11 is a bankruptcy, but it's a reorganizing type venture. I think the original investors just got overwhelmed by the amount of debt they had to pay interest on and it just kind of took them down."

Taylor said he doesn't anticipate the Chapter 11 filings significantly impacting the county's tax base.

"We're not anticipating a millage increase whatsoever," he said. "This will not affect our projections as far as tax revenue. In fact, the sales tax in the last few months has been growing, mostly because of LakePoint."

Pallone said the impact of the bankruptcy on Emerson's taxes should also be negligible. 

"Nothing's going to change as far as what the digest is for that area," he said. "This is really just a restructuring bankruptcy, they're still paying all their debts, so I don't see that having any impacts on the tax revenue generation."

If anything, with new gas stations and fast food restaurants coming in, he said he expects developments in and around LakePoint to put more money in the city's coffers. 

"As more items go in and more businesses open up, those properties become higher value so we're expecting that will go onto the digest," he said.

Another tax revenue factor to consider, Pallone said, is LakePoint's diminishing tax abatement incentives. "We're pretty far along into that," he said. "We're five years into that [and] it drops by about 10 percent a year. So we're at a point where that starts to fade away as well."

Overall, Lemmon said she expects the Chapter 11 filings to have little bearing on the county's tax intake. 

"I do observe that the countywide revenue projections are created with a very conservative mindset," she said. "With that said, I do not anticipate [a] major impact on local revenues."

Large-scale development continues at LakePoint, with the road extending to the complex's planned northern campus expected to be completed by next year. 

"That ownership tells us that they're committed to the master plan from the original inception of LakePoint," Taylor said. "That's what we've been told and they're moving forward with it."

That project, Taylor said, is being funded by Georgia Department of Transportation grants, while the water and sewer infrastructure will be handled by the City of Emerson.

"We've actually been very conservative as far as doing any kind of major efforts that were contingent on LakePoint happening," Pallone said. "We're forward looking in that we did an expansion of our wastewater treatment facility, and LakePoint was a part of that in our mindset ... we also understand that those kinds of utilities are a good source of revenue once you get them established."

While Pallone said the city will eventually take over that infrastructure, they're not the ones paying for its development.

"It's being paid for through the other venues," he said. "It will become a part of Emerson, ultimately, but we haven't really spent extra money on infrastructure ... one of the things we hope to gain out of this is we'll get more of a revenue stream that allows us to take care of the citizens of Emerson." 

Northern campus expansion, Pallone said, would almost certainly require the city to expand its own workforce, primarily its number of public works and police force employees.

"Obviously, we are going to have to grow the city somewhat to manage this type of facility," he said. "But that's in the future. When it happens, we'll start growing, and we'll grow based on what we need."

Lemmon said she does not believe LakePoint's bankruptcy filings will be a deterrent to other developments emerging in Bartow.

"I do not think this circumstance will have [an] impact on future decisions of other economic development projects," she said. "In other words, each deal is based on that project’s individual dynamics —  this situation seems to be more about the internal financial structuring of decision-makers than reflections of the local market. Economic indicators of our market are strong, and I believe prospective investors will see that."

Nor did she say she views the Chapter 11 proceedings as a deathblow for the Emerson complex itself.

"I'm cautiously optimistic they will emerge as a financially stronger organization and that visitors and employees will see little-to-no impact," she said.

At least one representative of a business near LakePoint said she isn't worried about the bankruptcy filings having a detrimental effect on the local economy. 

"I think it's something, apparently, that was needed," said LaDonna Mears, sales manager for the dual-branded Sleep Inn and MainStay Suites Hotel at 146 Old Allatoona Road. "I really think if it continues to grow like it's planned to do, it will be very beneficial to the county."

Taylor said one option that's not on the table for Rimrock, however, is the county financing future LakePoint developments. 

"They haven't asked and we're not available to subsidize LakePoint in any way moving forward," he said.

But if Rimrock came to the City of Emerson looking for some financial assistance, Pallone said the outcome would be up in the air.

"If it looks like it's beneficial to our citizens, then we would obviously look at it," he said. "It is what it is for right now. If something came in that made sense to do that, and the council and mayor all agree, then we would do it, but at this point, we're not aware of any requests like that."